You make 3000 annual deposits into a retirement account that

You make $3,000 annual deposits into a retirement account that pays 9.9 percent interest compounded monthly Required How large will your account balance be in 40 years? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16)) Account balance in 40 years

Solution

a.

Account balance in 40 years = $130,926.92

Using financial calculator BA II Plus - Input details:

4 years

I/Y = Rate or yield =

9.90

PMT = Payment =

$0.00

N = Total number of compounding period =

40

PV = Present Value =

-$3,000.00

CPT > FV = Future Value =

$130,926.92

Requirement 1.

Present Value = $341,570.65

Using financial calculator BA II Plus - Input details:

#

FV = Future Value =

$0.00

I/Y = Yield = Rate = 9/12 =

0.75

N = Total number of compounding periods = 4 x 12 =

48

PMT = Payments =

-$8,500.00

CPT > PV = Present Value or Price of the bond =

$341,570.65

Requirement 2.

Present value = $30,000 + Present value of $7000 per month =

Present value = $30,000 + $281,293.47

Present value = $311,293.47

-----

Present value of $7000 per month = $281,293.47

Using financial calculator BA II Plus - Input details:

#

FV = Future Value =

$0.00

I/Y = Yield = Rate = 9/12 =

0.75

N = Total number of compounding periods = 4 x 12 =

48

PMT = Payments =

-$7,000.00

CPT > PV = Present Value or Price of the bond =

$281,293.47

Using financial calculator BA II Plus - Input details:	4 years
I/Y = Rate or yield =	9.90
PMT = Payment =	$0.00
N = Total number of compounding period =	40
PV = Present Value =	-$3,000.00
CPT > FV = Future Value =	$130,926.92